The objective of this paper is to analyze the impacts of minority shareholdings among rival firms on competition. The application of MHHI (Modified Herfindahl Hirschman Index), a measure of market concentration recently proposed in the literature, shows that these structural links may cause adverse effects on competition. Such losses are intensified with increasing market-shares and the controlling power that the acquiring firm has on the acquired one. However when these links are ignored or taken as full mergers, such losses are underestimated or overestimated, respectively. Therefore we conclude that the MHHI would be the most adequate measure of market concentration in the presence of minority shareholdings among rival firms.
Competition; Index of Concentration; Minority Shareholdings
